1000

SMART
SPENDERS
B
o
o
z
A
l
l
e
n
H
a
m
i
l
t
o
n

s
a
n
n
u
a
l
s
t
u
d
y
o
f
t
h
e
w
o
r
l
d

s
1
,
0
0
0
l
a
r
g
e
s
t
c
o
r
p
o
r
a
t
e
R
&
D
b
u
d
g
e
t
s
u
n
c
o
v
e
r
s
a
s
m
a
l
l
g
r
o
u
p
o
f
h
i
g
h
-
l
e
v
e
r
a
g
e
i
n
n
o
v
a
t
o
r
s
w
h
o
o
u
t
p
e
r
f
o
r
m
t
h
e
i
r
i
n
d
u
s
t
r
i
e
s
.
P
h
o
t
o
g
r
a
p
h
b
y
C
h
r
i
s
C
a
l
l
i
s
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l
r
e
p
o
r
t
46
1000
SMART
SPENDERS
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l
r
e
p
o
r
t
47
b
y
B
a
r
r
y
J
a
r
u
z
e
l
s
k
i,
K
e
v
in
D
e
h
o
f
f
,
a
n
d
R
a
k
e
s
h
B
o
r
d
ia
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l
r
e
p
o
r
t
48
s
t
r
a
t
e
g
y
+
b
u
s
i
n
e
s
s
i
s
s
u
e
4
5
What does Dentsply International, a midsized
manufacturer of dental products in York, Penn., have in
common with Kobe Steel, a Japanese metals producer?
What qualities are shared by Cadbury Schweppes, the
European candy and beverage company; Tata Motors,
the up-and-coming Indian automaker; and Google, the
superstar of Silicon Valley? What links Caterpillar, the
leviathan of earthmoving equipment, with Apple,
the nimble conjurer of the iPod Nano, and Adidas, the
German purveyor of sportswear? What does Toyota have
in common with Christian Dior?
The answer: All these companies spend less than
their competitors on research and development, yet out-
pace their industries across a wide range of performance
metrics. They are among the worlds high-leverage
innovators, a select subset of the Booz Allen Hamilton
Global Innovation 1000, our annual roster of compa-
nies that spend the most on research and development
worldwide. As different as they are from one another,
these 94 smart spenders have one thing in common.
They get more bang for their R&D buck than their
peers, even their highly innovative peers. And they have
managed to do so consistently over a five-year period.
They may not develop the highest number of new prod-
ucts or services, but they consistently reap the greatest
financial reward from every dollar they invest in R&D.
Now in its second year, the Global Innovation 1000
study is the most comprehensive effort to date to assess
the influence of R&D on corporate performance. Last
year, our in-depth analysis studying the 1,000 com-
panies that reported the most spending on research and
development around the world in 2004 demonstrat-
ed that there is no simple relationship between the level
of R&D spending and corporate performance. This
year, the data reinforced that conclusion and extended
it, with a new understanding of innovation practices and
additional metrics (such as the number and quality of
patents). Among the specific findings:
Deep pockets can be dry wells. Analysis of the
2005 Global Innovation 1000 confirms the major find-
ing from our initial study last year: Money simply can-
not buy effective innovation. There are no significant
statistical relationships between R&D spending and the
primary measures of financial or corporate success: sales
and earnings growth, gross and operating profitability,
market capitalization growth, and total shareholder
returns. Gross profits as a percentage of sales is the single
performance variable with a statistical relationship to
R&D spending.
Less than 10 percent of companies are high-
leverage innovators. Compared with others in their
industries, only 94 of the companies in the Global Inno-
vation 1000 produced significantly better performance
per R&D dollar over a sustained period.
Companies are getting better at squeezing bene-
fits from R&D spending. R&D spending by the Global
Innovation 1000 rose last year by more than $20 billion,
but revenues rose more.
Bigger can be better, even if it doesnt boost
breakthroughs. Scale provides advantages to R&D
spenders. For the largest 500 companies, ranked by rev-
enue and indexed by industry, median R&D spending
was only 3.5 percent of sales in 2005, compared with
7.6 percent for the 500 smallest firms.
Patents generally dont drive profits. Boosting
R&D spending can increase the number of patents
that a company controls, but there is no statistical rela-
tionship between the number or even the quality of
Barry Jaruzelski
(jaruzelski_barry@bah.com), a
vice president with Booz Allen
Hamilton in New York, is the
firms lead marketing officer.
He concentrates on corporate
strategy, organizational trans-
formation, and time-to-market
improvement for companies
in high-technology industries
and manufacturers of highly
engineered products.
Kevin Dehoff
(dehoff_kevin@bah.com), a vice
president with Booz Allen
Hamilton in New York, is the
global leader of the firms
innovation service offering. He
has spent more than 15 years
helping clients improve effi-
ciency and effectiveness in
product development.
Rakesh Bordia
(bordia_rakesh@bah.com) is a
principal with Booz Allen
Hamilton in New York. He
specializes in improving inno-
vation effectiveness and
efficiency for clients in engi-
neered products industries.
Also contributing to this article
were Booz Allen Hamilton Vice
President Alexander Kandybin
and Associate Owen Ward, and
Rob Norton.
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l
r
e
p
o
r
t
49
patents and overall financial performance.
Masters of the innovation value chain have an
edge. The high-leverage innovators and the companies
with best overall performance distinguish themselves
not by the money they spend, but by the capabilities
they demonstrate in ideation, project selection, develop-
ment, or commercialization.
Conventional wisdom often seems to view R&D as
a predictable black box that automatically translates
todays innovation investments into tomorrows profits,
even if nobody quite understands how it works. The
principal findings from our study both this year and
last year may undermine some peoples faith in inno-
vation as a financial savior; however, they comport with
the real-world experience of most corporate decision
makers, as well as with the lessons of business history.
Innovation often does lead to higher performance, but
the process isnt automatic. Many companies R&D
efforts are unfocused. Money is wasted reinventing
wheels that others have already rolled out. Good ideas
get stuck in developmental bottlenecks. And promising
innovations never get to market because of flawed
understanding of customers needs, and poor marketing
and investment planning.
In this years study, we systematically set out to find
which companies have been getting R&D spending
right, and then to identify their common attributes. To
do this, we analyzed financial data for the Global
Innovation 1000 using seven performance screens
sales growth, gross margin percentage, gross profit
growth, operating margin percentage, operating income
growth, total shareholder returns, and market capitaliza-
tion growth from 2000 through 2005. We chose five
years as an appropriate time horizon for measuring the
effects of R&D expenditures. That may seem short for
basic research, but the full life cycle for a single innova-
tion in most industries is five years or less. Thats because
only about 15 percent of corporate R&D spending goes
to research; the rest is spent on development and com-
mercialization, which have much shorter time frames.
Analysis of the performance screens revealed that
94 companies within the Global Innovation 1000
our high-leverage innovators consistently outper-
formed their peers over the five-year period, while
spending less on R&D as a percentage of sales than their
industry median.
How did they do it? Theres no silver bullet; we
found examples of many different models and
approaches. If these high achievers have one thing in
common, it seems to be a focus on building multifunc-
tional, company-wide capabilities that can provide them
with sustainable competitive advantage. They design
their innovation investment for the long run, and create
superior growth and profitability over time.
Bucks versus Bang
Each year, Booz Allen studies the worlds largest cor-
porate R&D spenders to better understand how com-
panies can maximize their return on innovation
investment. We rank the 1,000 publicly traded corpora-
tions worldwide that spend the most on research and
development as reported in their most recent annual
financial statements. Private companies, and those pub-
lic companies that do not disclose R&D spending
(including most financial-services companies and retail-
ers), are thus excluded from the Global Innovation
1000. (See Methodology, page 60.)
The 1,000 companies on this years list spent a com-
High-leverage innovators seem to have one
thing in common: They focus on building
multifunctional, company-wide capabilities.
Profiling the Global Innovation 1000
The Global Innovation 1000 compa-
nies spent a total of $407 billion on
research and development in 2005,
up 6 percent from 2004 an amount
bigger than the combined GDP of
Denmark and Norway and roughly
equivalent to the budget of the U.S.
Department of Defense. The number
one spender on R&D in 2005 was the
Ford Motor Company, with a budget
of $8 billion; number 1,000 was the
Makita Corporation, a Japanese
maker of power tools with a budget
of $42.6 million. Spending is highly
concentrated among the largest
companies: The 20 largest R&D
spenders accounted for $116 billion,
or 28 percent, of the Global Inno-
vation 1000 total.
This year, 164 new companies
moved onto the list, accounting for
6.3 percent of total R&D spending. Of
the 164 companies that exited, 35
were acquired by larger companies
on the list; the rest were supplanted
by other companies that spent more.
The median of R&D as a percentage
of sales for the Global Innovation
1000 was 3.84 percent in 2005, and
has slowly but steadily declined from
4.09 percent in 2001. Most of this
decline, it appears, can be explained
by the increase in size of the average
Global Innovation 1000 company:
$10.5 billion in sales in 2005 vs. $8.5
billion in 2001. Larger companies
generally spend a smaller percent-
age of sales on R&D than do smaller
companies.
Industry Breakdowns
The distribution of R&D spending by
industry reflects the relative size of
the industries themselves. Thus,
as shown in Exhibit 1, nearly two-
thirds of the 2005 total was spent by
companies in computing and elec-
tronics (26 percent), health (22 per-
cent), and automotive (17 percent).
The R&D-to-sales ratio, as shown
in Exhibit 2, illustrates the impor-
tance of innovation to an industry or
enterprise and shows the huge
variations in this measure. Health
companies were the most intense
R&D spenders in 2005 (displacing the
software category from the number
one position that it had occupied in
2004), with a median ratio of 11.2 per-
cent. At the other end of the scale,
chemicals and energy companies
spent a median 1.1 percent of sales
revenues on R&D.
s
t
r
a
t
e
g
y
+
b
u
s
i
n
e
s
s
i
s
s
u
e
4
5
bined $407 billion on innovation in 2005, compared
with $384 billion spent by the top 1,000 spenders in
2004. Altogether, for the companies included in the top
spenders since 2000, R&D spending has grown 4.2 per-
cent annually.
Global R&D spending is highly concentrated
among the top 1,000. The next 1,000 companies to-
gether spent a mere $25 billion in 2005. We estimate
that the Global Innovation 1000 accounts for about 85
percent of total global corporate R&D spending, and 55
percent of all R&D spending, including government
and not-for-profit R&D. (See Profiling the Global
Innovation 1000, above.)
We used the ratio of spending to sales (the percent-
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l
r
e
p
o
r
t
50
15%
10%
5
-0.1%
-1.5%
-
+0.3%
11.2%
7.5%
4

S
a
l
e
s
R
a
t
i
o
Source: Booz Allen Hamilton Global Innovation 1000
R&D-to-sales ratios show that the health and software industries invest
far more of their income in innovation than telecom, chemicals, and
energy do. Between 2004 and 2005, health care overtook software to
become the highest-spending industry on innovation.
Total: $407 Billion
Computing &
Electronics
$105B (26%)
Other
$10B (2.5%)
Health
$87.3B (22%)
Auto
$70.0 B (17%)
Technology
$26.3B (6.5%)
Chemicals
& Energy
$28.4B (7%)
Software
& Internet
$20B (4.9%)
Industrials
$23.2B (5.7%)
Consumer
$15.4B (3.8%)
Aerospace
& Defense
$16.1B (4%)
Telecom
$5.4B
(1.3%)
Exhibit 1: Innovation by Industry, 2005
R&D spending by industry shows that three industries auto, health, and
computing/electronics account for nearly two-thirds of the total.
15%
20%
10%
5
R&D spending growth around the world, again by headq
location; innovation spending in China, India, and the r
the world is rising almost four times as q
elsewhere. (Total world spending rose 4.2 per
stry, 2004/2005
1
2004 2005
OLD
2005
2004
Exhibit 2: Highest- and Lowest-Spending
Industries, 2004 and 2005
Exhibit 3: R&D Spend Growth, 20002005
Source: Booz Allen Hamilton Global Innovation 1000
11.5%
age of a companys revenue spent on R&D) to mean-
ingfully compare the amount that companies spent over
time. We looked for cause and effect over all possible
time horizons, performing approximately 10,000 analy-
ses, matching our seven financial metrics against such
factors as industry categories and corporate locations.
Our analysis of the 2005 data confirmed the main find-
ing from last years study of 2004 data: There is simply
no statistical relationship between the performance bang
and the R&D buck.
The single measure for which a relationship
between R&D expenditures and corporate performance
can be statistically demonstrated is gross margin gross
profits as a percentage of sales. The 500 companies that
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l
r
e
p
o
r
t
51
Regional Breakdowns
Since companies rarely disclose the
geographic breakdown of research
and development spending, this study
assigns innovation spending to the
region in which each corporate head-
quarters is located. This helps explain
why innovation spending appears so
concentrated in the industrialized
world. The costs of Ciscos R&D facili-
ties in Bangalore, Toyotas in Thailand,
and Nokias in Beijing appear within
the totals for North America, Japan,
and Europe, respectively.
But even with that unavoidable
distortion, the spending mix shifted
somewhat this year, with slight
declines in Japan and North America,
and a significant increase in the rest
of world category, from 2.9 percent in
2004 to 4.6 percent in 2005. This last
category includes Australia, Brazil,
Singapore, South Africa, South Korea,
and Taiwan; the biggest growth came
from South Korea and Taiwan. As
shown in Exhibit 3, spending has
grown most rapidly over the last five
years in India, China, and the rest of
world countries.
The overall trend is clear: R&D
spending is becoming much more
international. A survey conducted in
May 2005 by Booz Allen and INSEAD
indicated that only one-third of R&D
sites are still located in companies
home countries, down from 55 per-
cent in 1975.
15%
10%
5%
-0.4%
-0.1%
-0.4%
-0.1%
-0.1%
-0.2%
-0.1%
-1.5%
-0.3%
T
e
c
h
n
o
l
o
g
y
-0.1%
A
e
r
o
s
p
a
c
e
&
D
e
f
e
n
s
e
2005 Average: 3.84%
S
o
f
t
w
a
r
e
&
I
n
t
e
r
n
e
t
+0.3%
11.2%
7.5%
4.0% 4.0% 3.9%
2.2%
2.0%
1.5% 1.5%
1.1%
H
e
a
l
t
h
C
o
m
p
u
t
i
n
g
&
E
l
e
c
t
r
o
n
i
c
s
A
u
t
o
I
n
d
u
s
t
r
i
a
l
s
C
o
n
s
u
m
e
r
T
e
l
e
c
o
m
O
t
h
e
r
C
h
e
m
i
c
a
l
s
&
E
n
e
r
g
y
R
&
D

t
o

S
a
l
e
s
R
a
t
i
o
Source: Booz Allen Hamilton Global Innovation 1000
R&D-to-sales ratios show that the health and software industries invest
far more of their income in innovation than telecom, chemicals, and
energy do. Between 2004 and 2005, health care overtook software to
become the highest-spending industry on innovation.
Total: $407 Billion
Computing &
Electronics
$105B (26%)
Other
$10B (2.5%)
Health
$87.3B (22%)
Auto
$70.0 B (17%)
Technology
$26.3B (6.5%)
Chemicals
& Energy
$28.4B (7%)
Software
& Internet
$20B (4.9%)
Industrials
$23.2B (5.7%)
Consumer
$15.4B (3.8%)
Aerospace
& Defense
$16.1B (4%)
Telecom
$5.4B
(1.3%)
computing/electronics account for nearly two-thirds of the total.
15%
20%
10%
5%
R
e
s
t
o
f
W
o
r
l
d
C
h
i
n
a
&
I
n
d
i
a
E
u
r
o
p
e
5.2%
2.3%
3.8%
19.7%
17.0%
N
o
r
t
h
A
m
e
r
i
c
a
J
a
p
a
n
R&D spending growth around the world, again by headquarters
location; innovation spending in China, India, and the rest of
the world is rising almost four times as quickly as spending
elsewhere. (Total world spending rose 4.2 percent in five years.)
OLD
2005
2004
Exhibit 2: Highest- and Lowest-Spending
Industries, 2004 and 2005
Exhibit 3: R&D Spend Growth, 20002005
Source: Booz Allen Hamilton Global Innovation 1000
11.5%
s
t
r
a
t
e
g
y
+
b
u
s
i
n
e
s
s
i
s
s
u
e
4
5
have the highest rates of R&D spending as a percentage
of sales are more likely than other companies in their
industries to achieve superior gross margins. (See
Exhibit 4.) This makes sense, because gross margin
measures the direct profit from sales after product costs
such as materials, labor, manufacturing, and direct ship-
ping. It is thus the financial performance measure most
directly influenced by a companys R&D operation.
Researchers who study innovation estimate that 70 to
80 percent of the final unit cost of a product (the cost
reflected in gross margin) is driven by R&D-based
design decisions for example, product specifications,
the number and complexity of features in a device, the
choice of standardized or customized parts, or the selec-
tion of manufacturing processes. This correlation of
R&D spending and gross margin shows that in many
companies, the R&D silo has succeeded in its narrow
goal: creating a lower-cost offering that thus yields a
wider margin, or a more differentiated offering for
which a higher price can be charged.
Unfortunately, for most companies and for the
Global Innovation 1000 overall the financial value
of fatter gross margins is not ultimately captured, pre-
sumably because it is eroded in the marketing, sales,
operational, and administrative work required to bring
the product to market. Success thus requires a cross-
functional strategic approach to innovation: building a
value chain that integrates R&D more effectively with
marketing, sales, operations, and cost management.
Patents and Scale
R&D spending does relate statistically to the number of
patents granted, across all the industries we studied.
However, when we compared the results of our analysis
of the Global Innovation 1000 companies with data
from ipIQ, a technology analysis firm known for its
comprehensive patent database, we found no statistical
relationship between financial performance and either
patent counts or patent quality. (To compile its patent
quality ratings, ipIQ tracks such measures as the num-
ber of citations in the scientific and technical literature.)
Evidently, as in the case of gross margin, more R&D
spending can lead to more innovation activity, but it
doesnt necessarily create more valuable innovations.
Public officials often fixate on the number of
patents issued as a proxy for national innovativeness, but
our finding that patents dont relate statistically to finan-
cial performance implies that quantity is a misleading
measure. One reason is that very few patents are truly
significant just as only a handful of the hundreds of
thousands of books published each year become best-
sellers. Moreover, many important innovations dont
involve new patents. (Television technology, for exam-
ple, is still based on patents from the first half of the
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l
r
e
p
o
r
t
52
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Overall
M
e
d
i
a
n
G
r
o
s
s
M
a
r
g
i
n
%
By Industry
Source: Booz Allen Hamilton Global Innovation 1000
Exhibit 4: Impact Within the Silo, 2005
Above Median R&D-to-Sales Ratio
29%
17%
28%
45%
35%
71%
30%
76%
38%
Below Median R&D-to-Sales Ratio
44%
Overall
Industry
Indexed
Aerospace &
Defense
Auto Chemicals &
Energy
Computing &
Electronics
Consumer Health Industrials Software &
Internet
Technology Telecom
Innovation spending affects only one performance variable consistently: the median gross margin, an indicator of effectiveness primarily within the
R&D silo. These measures are greater among high-spending companies (the light green bars) than among low-spending companies (the darker bars) in
every industry except automobiles and consumer products.
40%
30%
20% 20%
23%
26%
35%
57%
21%
63%
21%
34%
20th century.) Value is created by effectively combining
new or existing patents with the ability to recognize and
fulfill customer needs.
There is also a relationship between company size
and R&D investment: Companies above the median in
sales tend to spend a smaller proportion of sales on
R&D than do the smaller companies. (See Exhibit 5.)
Moreover, the lower R&D-to-sales ratios of the large
companies dont seem to hurt them. Their performance
on such measures as sales growth, profitability, and mar-
Top 20 R&D Spenders, 2005
Representing $116 billion, or 28 per-
cent, of global innovation spending on
R&D, the Top 20 companies are well-
known multinationals headquartered
in Europe, North America, and Japan.
They have a median R&D-to-sales
ratio of 7 percent, nearly 1.8 times that
of the remaining 980 companies, re-
flecting the prevalence of health and
computing firms as innovation leaders.
The Top 20 increased their median
R&D spending at a rate of 5.8 percent
in 2005 about average for the Global
Innovation 1000 as a whole. Over the
past five years, however, the R&D
spending of the Top 20 has grown
faster than spending at other compa-
nies in their industries (6.7 percent vs.
4.3 percent). Furthermore, their R&D-
to-sales ratios are significantly higher
(6.8 percent versus 3.8 percent).
Only one company on this list,
Toyota, qualifies as a high-leverage
innovator by our criteria. As a whole,
the Top 20 do not appear to be lever-
aging their scale advantage. They are
spending on R&D at a higher rate than
their competitors without capturing
any corresponding performance gain.
Source: Booz Allen Hamilton Global Innovation 1000
Company Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
1
R&D Spend ($M) Headquarters
Region
Industry R&D /
Sales
20
Ford
Pfizer
Toyota
DaimlerChrysler
General Motors
Siemens
Johnson & Johnson
Microsoft
IBM
GlaxoSmithKline
Samsung
Intel
Volkswagen
Sanofi-Aventis
Matsushita
Novartis
Nokia
Sony
Roche Holdings
Honda Motor
$ 8,000
$ 7,442
$ 7,178
$ 7,019
$ 6,700
$ 6,546
$ 6,312
$ 6,184
$ 5,842
$ 5,700
$ 5,428
$ 5,145
$ 5,071
$ 5,025
$ 4,989
$ 4,846
$ 4,753
$ 4,698
$ 4,578
$ 4,508
$115,965
North America
North America
Japan
Europe
North America
Europe
North America
North America
North America
Europe
Rest of World
North America
Europe
Europe
Japan
Europe
Europe
Japan
Europe
Japan
Auto
Health
Auto
Auto
Auto
Industrials
Health
Software & Internet
Computing & Electronics
Health
Computing & Electronics
Computing & Electronics
Auto
Health
Technology
Health
Computing & Electronics
Computing & Electronics
Health
Auto
5%
15%
4%
4%
3%
7%
12%
16%
6%
14%
7%
13%
4%
15%
6%
15%
11%
7%
16%
5%
7%
2004
Rank
3
2
5
4
6
7
10
1
9
11
17
12
13
31
8
18
15
14
19
16
% Change
over 2004
8.1%
3.1%
7.6%
0.2%
3.1%
10.9%
21.3%
20.5%
0.5%
8.0%
12.4%
7.7%
7.5%
NA
8.2%
16.2%
1.3%
5.9%
10.7%
9.1%
5.8%
Top 20 Global R&D Spenders, 2005
Average: Average: Total:
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l

r
e
p
o
r
t
53
High-Leverage Innovators
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l

r
e
p
o
r
t
54
Japan



North America



Europe






Casio Computer
Daiwa House
Fujikura
Ibiden
Kobe Steel
Komatsu
Konica Minolta
Makita
Nidec
NOK
Sanken Electric
Shimadzu
Sumitomo Electronics Industries
Sysmex
Tokyo Ohka Kogyo
Toyota Motor*
$161
$55
$108
$60
$213
$444
$593
$43
$258
$81
$100
$71
$569
$72
$50
$7,178

3.10%
0.40%
2.40%
2.10%
1.40%
3.00%
6.30%
2.10%
5.40%
2.10%
6.90%
3.30%
3.20%
9.30%
5.80%
3.90%

Rest of World (including India and China)


Asustek Computer
AU Optronics
Chi Mei Optoelectronics
Cia Vale Do Rio Doce
Coretronic
High Tech Computer
Hon Hai Precision Industry
Hyundai Motor*
Korea Circuit
Lite-On Technology
Mediatek
NCsoft
Petrobras
POSCO
Powerchip Semiconductor
Samsung Electronics
Taiwan Semiconductor Manufacturing
Tata Motors*
Techtronic Industries
Teva Pharmaceutical Industries

$189
$152
$134
$276
$43
$75
$272
$1,405
$73
$115
$225
$44
$384
$220
$55
$5,428
$437
$108
$63
$369
1.70%
2.20%
2.70%
2.00%
2.30%
3.30%
1.00%
2.40%
14.60%
1.60%
13.70%
13.40%
0.70%
0.90%
3.40%
6.90%
5.30%
2.00%
2.20%
7.00%
Company 2005 R&D
($M)
2005 R&D /
Sales
Company 2005 R&D
($M)
2005 R&D /
Sales
*Six performance indices above R&D-to-sales ratio were used rather than seven. Source: Booz Allen Hamilton Global Innovation 1000


Alliant Techsystems
Apple Computer
Barr Pharmaceuticals
Biomet
Black & Decker
Boston Scientific
C.R. Bard
Caterpillar
ConocoPhillips
Dell
Dentsply International
Eaton
eBay
Ecolab
Endo Pharmaceuticals
Energizer
Exxon Mobil
Falconbridge
Fisher Scientific
Forest Laboratories
Google
Illinois Tool Works
International Rectifier
Kellogg
Kronos
Lyondell Chemical
MEMC Electronic Materials
Newmont Mining
PACCAR
Par Pharmaceutical
Parker Hannifin
Petro-Canada
Plantronics
Praxair
Research In Motion
Respironics
Reynolds American
SanDisk
Smith International
St. Jude Medical
Stryker
Suncor Energy
Symantec
The Cooper Companies
Varian Medical Systems
Weatherford
Woodward Governor
Yahoo Inc.


$52
$534
$128
$85
$134
$680
$115
$1,084
$125
$463
$47
$287
$328
$68
$88
$70
$712
$59
$44
$410
$484
$128
$105
$181
$51
$91
$51
$73
$118
$63
$165
$224
$63
$80
$158
$46
$53
$195
$74
$369
$280
$46
$665
$43
$82
$107
$50
$547
1.60%
3.80%
12.30%
4.20%
2.10%
10.80%
6.50%
3.00%
0.10%
0.80%
2.70%
2.60%
7.20%
1.50%
10.80%
2.30%
0.20%
0.70%
0.80%
14.10%
7.90%
1.00%
8.90%
1.80%
9.80%
0.50%
4.50%
1.70%
0.80%
14.50%
2.00%
1.50%
8.40%
1.00%
7.60%
5.00%
0.60%
8.40%
1.30%
12.70%
5.70%
0.50%
16.00%
5.30%
5.90%
2.50%
6.00%
10.40%
Adidas
Cadbury Schweppes
Christian Dior
Meda
Phonak
Recordati
Smith & Nephew
Synthes
Trelleborg
Volvo Group*

$78
$122
$47
$49
$49
$56
$122
$115
$64
$1,011
0.90%
1.00%
0.30%
12.80%
7.30%
7.80%
4.80%
5.50%
2.00%
3.10%

These 94 companies, all members of
the Global Innovation 1000 (and thus
among the top spenders on R&D in
2005), also met the screens for high-
leverage innovation. They outper-
formed their peers in our analysis of
seven key performance measures:
sales growth, gross margin percent-
age, gross profit growth, operating
margin percentage, operating income
growth, total shareholder returns, and
market capitalization growth over a
five-year period. These companies
also spent less on R&D as a percent-
age of sales than their industry medi-
ans over the same five-year period.
Finally, companies whose reported
financial statistics were cast in doubt
(through sustained legal or govern-
ment challenges) were excluded from
the list.
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l

r
e
p
o
r
t
55
ket value growth is statistically indistinguishable from
that of the smaller, relatively higher-spending firms.
The overall impact of economies of scale helps
explain one trend in the historical data for the Global
Innovation 1000: Over the last five years, the median
ratio of R&D spending to sales has declined steadily
from 4.09 percent in 2001 to 3.84 percent in 2005. (See
Exhibit 6.) Although the percentage reduction seems
small, it translates into a lot of money: The Global
Innovation 1000 would have spent $27 billion more in
2005 if the ratio had held steady at its 2001 level
more than the total spent by the next 1,000 biggest
R&D spenders. Much of this phenomenon can be
explained by the increasing scale of companies around
the world; the average sales of the top 1,000 R&D
spenders increased from just under $8.1 billion to more
than $10.5 billion in five years. But another reason is
globalization: R&D is increasingly outsourced to facili-
ties in lower-cost regions of the world. More than 75
percent of the new R&D centers that businesses plan to
open during the next three years are to be located in
China or India, according to a recent study by Booz
Allen and INSEAD, the European graduate school of
business. (See Innovators without Borders, by Kevin
25%
20%
15%
10%
5%
0%
Overall
M
e
d
i
a
n

R
&
D
-
t
o
-
S
a
l
e
s

R
a
t
i
o
By Industry
?Company size brings the advantage of scale, in every industry studied. The blue bars show the largest 500 companies in the Global Innovation 1000; they spent consistently less, per revenue dollar, than their smaller counterparts.
Source: Booz Allen Hamilton Global Innovation 1000
Exhibit 5: The Benefits of Size, 2005
Below Median Size
Above Median Size
7.6%
3.5%
4.1%
3.2%
3.4%
3.3% 3.3%
1.6%
26%
13.9%
7.0%
3.8%
1.6%
20.0%
9.9%
3.1%
1.1%
3.2%
0.7%
16.4%
4.7%
2.3%
8.7%
1.0%
11.5%
Overall
Industry
Indexed
Aerospace &
Defense
Auto Chemicals &
Energy
Computing &
Electronics
Consumer Health Industrials Other Software &
Internet
Technology Telecom
Company size (as measured by annual revenues) brings the advantage of scale, in every industry studied. The light green bars represent the
largest 500 companies in the Global Innovation 1000 grouped by industry; they spent consistently less, per revenue dollar, than their smaller counter-
parts (the darker bars), without any apparent impact on performance.
Very few patents are truly significant
just as only a handful
of books become bestsellers.
Innovation in the Nonprofit Sector:
R&D for Curing Childhood Cancer
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l

r
e
p
o
r
t
56
s
t
r
a
t
e
g
y
+
b
u
s
i
n
e
s
s
i
s
s
u
e
4
5
Dehoff and Vikas Sehgal, s+b, Autumn 2006.)
Having a scale advantage is not the same as achiev-
ing high-leverage innovation that is, maintaining
consistently high returns per R&D dollar. Indeed, our
study suggests that many large companies are not taking
advantage of scale efficiencies and are therefore spending
more on R&D, proportionately, than other companies
that gain comparable financial impact. By the same
token, smaller companies need to find ways to capture
more benefits of scale virtually for example, through
partnerships that allow them to share investment costs,
or through the development and use of global and cross-
company innovation networks. They could thus spend
less on R&D as a percentage of sales without impairing
their financial performance.
Benefits from scale may also accrue to those who
pool innovative activity with their neighbors by
extension, enhancing the competitiveness of a nation
or locale. The best course for public policymakers inter-
ested in encouraging this kind of innovation is to focus
government efforts on basic research so that companies
can concentrate on development and commercializa-
tion. The public sector also has a role to play in helping
smaller companies improve their innovation processes.
One model in the U.S. is the Manufacturing Extension
Partnership operated by the National Institute of
Standards and Technology (NIST), which enables small
and medium-sized firms to tap the knowledge of busi-
ness experts, including innovation specialists.
The Integrated Value Chain
Despite the general lack of correlation between R&D
and financial performance, we identified among the
Global Innovation 1000 a select group: the 94 compa-
nies across industries that have found ways to consis-
tently get better returns on their innovation invest-
Many nonprofits spend significant
amounts on R&D, and although the
metrics they use to measure perfor-
mance are different from those of
corporations, the challenges their
leaders face in maximizing the bene-
fits of innovation investments are
often similar.
To gain insight into the nature of
innovation investment in the nonprofit
sector, we visited with the senior
management of St. Jude Childrens
Research Hospital in Memphis, Tenn.
St. Jude (no relation to the company
St. Jude Medical, listed on page 54)
was founded in 1962 by the late enter-
tainer Danny Thomas. It is widely rec-
ognized as an innovation leader in
treating catastrophic pediatric dis-
eases such as leukemia. The overall
cure rate for childhood cancers is 70
percent today, up from less than 20
percent in the early 1960s, and St.
Judes current goal is to raise that
rate to more than 90 percent. The hos-
pital spent $154 million on R&D in
2005, which would rank it 390th on the
Global Innovation 1000 study if it were
a publicly traded corporation.
Innovation at St. Jude is intimately
linked to delivery of service: The hos-
pital provides treatment free of charge
to thousands of children every year,
and even reimburses their travel and
living expenses. Unlike most research
hospitals, which rely mainly on gov-
ernment funding, St. Jude receives
more than 70 percent of its budget
from charitable donations, raised
by the American Lebanese Syrian
Associated Charities (ALSAC), a
Memphis-based group also cofounded
by Mr. Thomas.
Strategic decisions on R&D are
made by St. Judes executive team and
are based on an assessment of where
the hospital can be most productive.
This group recently decided, for exam-
ple, to maintain its focus on childhood
cancers, rather than allowing the
hospitals researchers some 200
scientists who work in 17 different
departments, such as biochemistry,
hematology, and immunology to
broaden their research into fields
such as Third World infectious dis-
eases. I think we can do things that
other places cant do because of our
focused mission, says Scientific
Director James Downing.
From Lab to Bedside
The idea of an innovation value chain
is as relevant at St. Jude Childrens
Research Hospital as it is at any for-
profit company. The hospital leaders
themselves draw a sharp distinction
between R&D ideation, project selec-
tion, and development. At the ideation
phase, researchers are given wide
latitude. In this business, the worst
thing you can do is try to direct basic
science and discovery, says CEO
William E. Evans, because you really
dont know where the advances are
going to come from.
But determining whether the scien-
tific discoveries made by the faculty
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l

r
e
p
o
r
t
57
ments. (See High-Leverage Innovators, page 54, for
the complete list.) Each of these companies consistently
outperformed the median in its industry from 2000
through 2005 across a wide range of performance vari-
ables sales growth, gross margin percentage, gross
profit growth, operating margin percentage, operating
income growth, total shareholder returns, and market
capitalization growth while spending less than its
industry median on R&D as a percentage of sales. (See
Exhibit 7.)
Although there is no single formula for innovation
success, each of these high-leverage innovators has
devised an R&D strategy that provides it with competi-
tive advantage, and we found several common themes
among their strategies.
Consider the innovation process as a kind of value
chain. (See Exhibit 8.) Each stage of the process
becomes a platform on which the next stage can be
built. Such a value chain would have four interdepen-
dent elements: the ideation process (basic research and
conception), project selection (the decision to invest),
product development (in tune with the rest of the
organization), and commercialization (bringing the
product or service to market and adapting it to customer
demands). Based on press coverage and interviews with
executives, we conclude that each of the 94 high-
leverage innovators has built sufficiently strong capabil-
ities in all four links of the value chain, and has
seamlessly integrated them, to provide a high level of
performance over time.
High-leverage companies are often famous for their
skill in one particular stage, but a closer look shows that
they reinforce that skill with competence at all stages of
the value chain. Google, for example, excels at ideation.
The search engine leader generates new ideas with blis-
tering speed, in part because of what Google calls its
are developed is a core managerial
decision. If a St. Jude scientist makes
a discovery not closely aligned with
the hospitals mission one, for
instance, that might be useful in treat-
ing Parkinsons disease Dr. Evans
says, we dont tell them not to work
on it. But we do tell them that were
not going to be the ones who translate
that discovery to the bedside.
St. Jude is also an innovator in
breaking down silo mentalities. The
hospital has been designed so that
employees in different disciplines
researchers, clinicians, pharmacolo-
gists, nurses, and geneticists all
work interactively and in close prox-
imity. Conscious effort is made, says
Dr. Evans, to cultivate people comfort-
able with cross-disciplinary collabo-
ration at all stages, in terms of who
gets recruited, who gets promoted,
and who gets rewarded.
One result is that St. Jude is recog-
nized (and copied) for its skill at trans-
lating medical research into effective
treatment, a challenge at research
institutions where scientists and clini-
cians tend not to communicate much
with each other. Dr. Evans says,
Translational research taking a
discovery in the basic science of a dis-
ease and translating that into better
treatment or a better diagnostic
has become a buzzword, but its the
way weve been thinking about child-
hood cancer for a long time.
Bets and Metrics
One of St. Judes newly created
departments Chemical Biology and
Therapeutics shows how the hospi-
tal places bets on R&D projects with
big potential. The departments mis-
sion is to test new substances and
drugs that might be useful in treating
childhood cancers. St. Jude built a
new facility that stores 2 million
chemicals at subzero temperatures,
quickly accessible via robots for
researchers to test. Although similar
facilities have been built for pharma-
ceutical firms and a few other
research institutions, no other organi-
zation had employed one in pediatric
cancer research.
The bottom line for a nonprofit
research hospital is different from
that of a corporation. Instead of gross
margin, net profit, and shareholder
returns, St. Jude tracks such results
as the decrease in mortality rates for
specific diseases, the reduction in
harmful side effects of treatments,
and the number of times that studies
by St. Jude researchers are cited in
other research.
The most important thing we do
every day is to provide unsurpassed
care for kids who come here, says Dr.
Evans. The most important thing we
do for tomorrow is our research,
which will change that treatment to
something better. Innovation, in and of
itself, is the ultimate product of this
organization.
B.J., K.D., R.B.
s
t
r
a
t
e
g
y
+
b
u
s
i
n
e
s
s
i
s
s
u
e
4
5
70-20-10 Rule: Staff, especially engineers, are encour-
aged to spend 70 percent of their time on core business,
20 percent on related business, and 10 percent on areas
entirely of their own choosing. Some ideas such as
Froogle (the shopping search engine), Orkut (the social
network), and Google Finance have moved more
slowly at the development or commercialization stages
than other ideas, but the integrated nature of the whole
Google portfolio carries the momentum of ideation for-
ward. Dentsply International, a manufacturer of dental
products that generates $1.7 billion of revenue, also
excels at ideation speed as a driving force for its innova-
tion value chain. One of its goals is to introduce at least
20 products per year. But Dentsply also excels at bring-
ing those ideas to market: In 2005, 43 percent of its
revenues were derived from products introduced in the
preceding five years.
Some high-leverage innovators are better known
for their success on the latter part of the innovation
value chain. Apple has well-honed capabilities in project
selection and commercialization, backed by keen
understanding of its customers. Caterpillar develops
promising technologies through
joint development projects and
advanced technology consortiums
with other businesses and the U.S.
Department of Energy. Toyota has
created competitive advantage by
developing its products and pro-
cesses faster and more efficiently
than most other corporations do.
And on closer look, these three
companies have systematic ideation
processes, including the involve-
ment of senior management (most
famously in the case of Apple CEO
Steve Jobs), in the conception and
definition of new ideas.
High-Leverage Strategies
Many high-leverage companies
apply distinctive approaches to
innovation at all four stages. For
example, from the ideation stage
through project selection and prod-
58
0
10
20
30
40
50
60
70
80
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
I
n
d
e
x

o
f

R
&
D
,

S
a
l
e
s
,

R
&
D
-
t
o
-
S
a
l
e
s

R
a
t
i
o

(
2
0
0
1

b
a
s
e

y
e
a
r

=

1
.
0
)
Exhibit 6: R&D Spending Rises, but Not as Much as Sales
This diagram, indexed against 2001 values to show the comparative trends, demonstrates rising
revenues (the light green line, from $8.1 trillion to $10.6 trillion) and rising innovation spending
(the gray line, from $331 billion to $407 billion), both for the Global Innovation 1000 companies in
aggregate. But the dark green line, the ratio of the two measures, shows that relevant R&D
spending per dollar of sales has decreased. If that ratio had stayed as high in 2005 as it was in
2001, these 1,000 companies would have spent $27 billion more, exceeding the total R&D budgets
of the next 1,000 companies.
Source: Booz Allen Hamilton Global Innovation 1000
2001 2002 2003 2004 2005
Sales
R&D
R&D-to-Sales Ratio
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l

r
e
p
o
r
t
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l

r
e
p
o
r
t
59
uct development, high-leverage
innovators tend to prize end-
user input. The Stryker Cor-
poration, a $4.9 billion medical
technology company headquar-
tered in Kalamazoo, Mich.,
works closely in R&D with the
surgeons and other medical pro-
fessionals who use its products.
The Black & Decker Cor-
porations innovation strategy is
also heavily determined by end-
users. Weve spent a lot of time
focusing on where they work,
where they play, where they buy,
and where they learn, says CFO
Michael Mangan. Understand-
ing and developing those rela-
tionships really increases the
efficiency of our new product
introductions.
At Illinois Tool Works Inc.
(ITW) a $3.7 billion maker
of industrial fasteners and components based in
Glenview, Ill. many of the best product innovations
come from simple observation coupled with a keen
understanding of our customers needs, notes a com-
pany representative. This observation begins with an
established program in which ITW engineers operate at
customers plants or work sites.
High-leverage innovators generally favor flatter and
nimbler management structures that make the innova-
tion process more transparent to the executive team.
Black & Decker keeps costs down partly by keeping
R&D focused and closely aligned with its business
units. Although worldwide design is coordinated from
headquarters in Towson, Md., Black & Decker main-
tains no centralized R&D function.
Nor does Stryker. All R&D activities are managed
in our divisions, says J. Patrick Anderson, vice president
for strategy and communications at the medical tech-
nology company. This allows us to target our R&D
efforts to meet specific customer needs versus doing a
great deal of early-stage, academic research.
But decentralization is not a universal prerequisite
0
10
20
30
40
50
60
70
80
7
6
5
4
3
2
1
0
P
e
r
f
o
r
m
a
n
c
e

I
n
d
e
x

f
o
r

9
4

C
o
m
p
a
n
i
e
s

/

9
0
6

C
o
m
p
a
n
i
e
s
Exhibit 7: High-Leverage Innovator Performance
The 94 high-leverage innovators spend (as a percentage of sales) about 44 percent of what the
other 906 Global Innovation 1000 members spend on R&D. But they perform better on all seven
performance measures ranging from 20 percent better (Average Gross Margin, at left) to six
times better (Market Capitalization Growth, at right).
Source: Booz Allen Hamilton Global Innovation 1000
Market
Capitalization
Growth
Gross Profit
Growth
Operating
Income
Growth
Relative Total
Shareholder
Return
Average
Operating
Margin
Average
Gross
Margin
Sales
Growth
6.3
3.4
3.3
2.9
2.5
1.8
1.2
Exhibit 8: Innovation Value Chain
Source: Booz Allen Hamilton Global Innovation 1000
Organization and Culture
Processes and Tools
Ideation Project Selection Product Development Commercialization

f
e
a
t
u
r
e
s
s
p
e
c
i
a
l

r
e
p
o
r
t
60
s
t
r
a
t
e
g
y
+
b
u
s
i
n
e
s
s
i
s
s
u
e
4
5
for high-leverage innovation. Some high-leverage inno-
vators manage the innovation value chain from the core,
with an integrated company-wide strategy for ideation,
development, selection, and commercialization. The
SanDisk Corporation, the world leader in the super-hot
market for flash memory and data storage cards, makes
broad innovation investments at the core technology
level to protect its position as a market leader. Its inno-
vation program starts with ownership of key intellectual
property. The company owns a patented flash memory
technology that enables it to increase memory capacity
on its chips, which provides a cost advantage to SanDisk
and others who license the technology.
In the flash memory industry, prices fall 40 to 50
percent per year. Thus, at SanDisk, a small team of sen-
ior executives meets twice per week to monitor prices
and market trends. Their awareness, fed back into the
companys innovation process, allows SanDisk to act
quickly on new opportunities. In 2004, for example, the
company realized that falling costs had created an
opportunity for it to enter the market for MP3 audio
players with a flash memorybased device. Management
contacted an original equipment maker, defined design
specifications, and delivered the new product to retailers
shelves within six months. The SanDisk player is now
number two in the market, after Apple. We dont have
big planning and product committees, says SanDisk
Chief Financial Officer Judy Bruner. Most decisions,
even those involving huge capital commitments, are
made pretty quickly by a small number of pretty vision-
ary people.
One factor helping SanDisks innovation efforts
translate to bottom-line performance is the companys
frugal management culture. We operate in a very lean
way across the board, says Ms. Bruner. In addition to
holding R&D expenditures below the level of rivals,
SanDisks selling, general, and administrative (SG&A)
spend is about 8 to 10 percent of revenue much less
than that of its key competitors.
Symantec, whose brands include the Norton line of
security software and Veritas data storage and backup
software, keeps its internal innovation engine running
Booz Allen Hamilton identified the 1,000
public companies around the world that
spent the most on research and develop-
ment in 2005 (companies for which public
data on R&D spending was available). The
last full-year data reported up to June 30,
2006, was considered the R&D spend for
the company for 2005. Subsidiaries that
were more than 50 percent owned by a
single corporate parent were excluded
because their financial results were in-
cluded in the parent companys reports.
For each of the top 1,000 companies, we
obtained key financial metrics for 2001
through 2005: sales, gross profit, operating
profit, net profit, historical R&D expendi-
tures, and market capitalization. All
foreign currency sales and R&D expendi-
ture figures prior to 2005 were translated
into U.S. dollars according to the 2005
exchange rate. In addition, total share-
holder return was gathered and adjusted
for each companys corresponding local
market total shareholder return.
Each company was coded into one of 10
industry sectors (or other) according to
Bloombergs industry designations, and
into one of five regional designations
according to reported headquarters loca-
tions for each company. To enable mean-
ingful comparisons across industries on
R&D spending levels, we indexed the R&D
spending level for each company against
the median R&D spending level for that
industry. A similar approach was employed
for financial metrics. Approximately 10,000
analyses were required to explore all com-
binations of regions, performance vari-
ables, and industries.
Booz Allen Hamilton Global Innovation 1000: Methodology
At SanDisk, most decisions, even for huge
capital commitments, are made by
a small number of pretty visionary people.
f
e
a
t
u
r
e
s
s
p
e
c
i
a
l

r
e
p
o
r
t
61
efficiently through a core engineering team that designs
and develops a variety of product lines. We have a large
portfolio of products and business units, says Ann
Marie Beasley, vice president of strategy. One of the key
contributors to our R&D bang for the buck is that
theres a lot of common engineering and design, as well
as actual code reuse.
Symantec applies the same high-leverage logic to its
acquisitions; it has made more than two dozen acquisi-
tions in recent years, generally of leading innovators in
adjacent markets that can complement the companys
distinctive position. Two years ago, according to Ms.
Beasley, Symantecs executive team became convinced
that stand-alone security software products would
become less viable as the industry consolidated and
security and storage solutions converged. They conclud-
ed they needed a broader portfolio of products to
compete. The result, completed in July 2005, was the
companys $13.5 billion acquisition of Veritas.
Corporate executives contemplating their R&D
budgets in light of our Global Innovation 1000 study
may recall John Wanamakers famous quip about ad-
vertising. He knew that half the money he spent was
wasted; he just didnt know which half. R&D spending
can seem equally mysterious.
To solve the riddle and achieve high-leverage inno-
vation, senior managers need to understand the entire
innovation value chain in their business and identify an
integrated process. The global economy places greater
value on economies of speed, scope and skill rather than
simply economies of scale, Sun Microsystems CEO
Jonathan Schwartz wrote recently in the Financial
Times. This means innovation must be achieved by dif-
ferent departments and business units within the same
organization working in parallel rather than in isolation
as they often do in large corporations. It also means
looking outside your organization to partners, suppliers
and customers for new and innovative ideas.
For most of the Global Innovation 1000 companies
those not among the 94 high-leverage innovators
our study implies that methodically building capabilities
along the innovation value chain could generate sig-
nificant improvements in return on research and devel-
opment spending. Companies can pick the elements
to generate this competitive advantage on the basis of
their industry, competition, and internal capabilities.
And as our high-leverage innovators show by example,
this in turn can yield superior and sustainable overall
financial performance. +
Reprint No. 06405
Resources
Kevin Dehoff and Vikas Sehgal, Innovators without Borders, s+b,
Autumn 2006, www.strategy-business.com/press/article/06305: A study
by Booz Allen Hamilton and Indias National Association of Software and
Service Companies (NASSCOM) on the expanding geographic footprint
of innovation sourcing.
Yves Doz, Keeley Wilson, Steven Veldhoen, Thomas Goldbrunner, and
Georg Altman, Innovation: Is Global the Way Forward? A joint study
by Booz Allen Hamilton and INSEAD, 2006, www.strategy-
business.com/media/file/global_innovation.pdf: Global companies current
and future innovation and R&D dispersion.
Jules Duga and Tim Studt, The State of Global R&D: 2005 Global
R&D Report, R&D Magazine, September 2005: Battelle Institute study
shows how government and business R&D spending has spread around
the globe.
Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia, Money Isnt
Everything: The Booz Allen Hamilton Global Innovation 1000, s+b,
Winter 2005, www.strategy-business.com/press/article/05406: The first
Global Innovation 1000 report.
Jonathan Schwartz, The Five Founding Principles That Drive
Innovation, Financial Times, September 12, 2006: Sun Microsystems
chief executive officer on managing the process of innovation.
Manufacturing Extension Partnership overview, National Institute of
Standards and Technology (NIST), www.mep.nist.gov/about-mep/
overview.html: Information about NISTs outreach program for small and
medium-sized manufacturers.
St. Jude Childrens Research Hospital, 2005 Annual Report:
www.stjude.org/content/files/3/20651report05.pdf: Research highlights,
plus organizational and financial information.
The 2006 Patent Scorecard, www.ipiq.com/what_we_do/
scorecard.asp?score_card_edition_id=2: ipIQ, a technology analysis firm
that produces the worlds most comprehensive patent database, from
which data was drawn for the Global Innovation 1000 analyses, ranks
corporate innovation within 15 industries by patent quality, technological
strength, and breadth of impact.
The 2005 R&D Scoreboard: The Top 750 U.K. and 1000 Global
Companies by R&D, www.dti.gov.uk/files/file10559.pdf: This study
from the U.K. Department of Trade and Industry provides detailed data
and analysis and claims a link between R&D and financial performance
that our study did not detect.